WASHINGTON--- Senator John Kerry (D-Mass.) will introduce legislation this week to provide much needed assistance and an economic stimulus for small businesses facing tightening credit markets. Senator Kerry’s bill would provide targeted tax incentives to small businesses to encourage new investments, reduce fees on loans, and double funding for microloans. Senator Kerry will work with his colleagues on the Finance Committee to try and include the small business tax provisions in the Committee’s stimulus package. Senators Mary Landrieu (D-La.) and Carl Levin (D-Mich.) are cosponsors of the legislation.
“We need to look at ways to create jobs, and providing help to small businesses through targeted tax incentives and increased access to capital is one of the best steps Washington can take. Small businesses already employ more than half of our country’s workforce, so we need to make sure that entrepreneurs have money in their pockets to continue to grow their businesses,” said Senator Kerry, Chairman of the Committee on Small Business and Entrepreneurship.
Kerry’s bill will increase from $125,000 to $200,000 the amount small businesses can write off their taxes for new investments for 2008 in order to encourage new investments this year. The bill increases the net operating carry back period for losses arising in taxable years ending in 2007 and 2008 from two years to five years. This will help struggling businesses with their cash flow.
In addition, Kerry’s legislation will reduce fees on borrowers and lenders to make credit more affordable and provide incentive for lenders to make small business loans. The bill will provide additional funding to leverage nearly $20 million in microloans, which proportionally benefit underserved communities, including women and minorities, more than traditional loan programs. With banks and lenders becoming more risk-averse, the federally backed loans, which provide guarantees of anywhere from 50 to 85 percent, will be increasingly important to spurring economic lending in the small business sector so entrepreneurs aren’t forced to finance their businesses with high-interest credit cards.
According to the National Association of Government Guaranteed Lenders, loans are down 12 percent from this time last year in the largest government-backed small business loan program known as 7(a). The 7(a) lending program is the largest source of long-term capital to small businesses in this country. Express loans — which are approved in weeks, not months, and therefore reflect current economic conditions more accurately — are down 23 percent.